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Wal-Mart and Amazon go Head to Head to Capture the Future of eCommerce

Published April 03, 2013 Share

Making their way toward the ring we have, in the yellow shorts, the battle from Seattle: Amazoooon! And, in the blue shorts, from the dirty south, it’s the store that always wants more: Wal-Maaaart!

While Amazon has been pursuing physical store integrations in its quest to carve out a greater online market share, Wal-Mart is countering by poking further into the online retail space. As Marcus Wohlsen wrote for Wired, “Wal-Mart has gone on a tech hiring frenzy. ... These days, Wal-Mart battles the Googles and Facebooks of Silicon Valley for engineering talent and sometimes wins.”

Wal-Mart’s foray into online has so far included mobile apps that allow shoppers to check out products in store using their smartphones, the ability to load gift cards to smartphones and checkout in store, in-store lockers for purchases made online, and utilizing inventory from store shelves to fulfill online orders.

Despite its relative age—as compared to Amazon—and staunch tradition as a physical retailer, Wal-Mart is finding success through innovations like multi-channel inventory management, local delivery, and in-store pickup. Indeed, in this battle, Wal-Mart may have the edge over Amazon in the form of 4,000 retail locations that can all act as warehousing locations for products sold online. (Impressively, “Two-thirds of the U.S. population are located within five miles of a Wal-Mart,” said Jeff McAllister, Walmart.com’s senior vice president of innovations.)

Amazon, on the other hand, has had to rely on a nascent system of third-party lockers, paired with the rapid expansion of its distribution center network. And with same-day delivery in many cities, and growth rates through the roof, no one can deny it is a force to be reckoned with in retail.

Yet Wal-Mart and Amazon will always have one thing in common: business models that depend on massive amounts of inventory and razor-thin margins. And while cheap prices might benefit consumers in the short term, Tom Gara points out in a recent blog post that this long-term battle could result in margins so small that only massive companies will be able to compete, driving out good retailers that can’t slash prices enough.

But not all shoppers want to shop at Wal-Mart, and a lot of us are interested in more than lower price tags. Because of this, in a world of Amazon-thin margins, other retailers are able to compete by offering the same advanced fulfillment features shoppers want.

Said another way, a well-executed in-store pickup program for a specialty retailer, that sends customers into the local stores to pick up online orders, can easily trump the lockers offered by Amazon and Wal-Mart.

Really … Let me explain …

Where would you rather pick up your running shoes that you ordered at 10 p.m. last night, after the kids went to sleep? At a Wal-Mart store or at a running shop that can give you advice on where to run, how to run, or how much to run? This is advice that you will never get at Wal-Mart. And wouldn’t this be the same for a bicycle helmet or a piano?

So the battling of the giants may affect where you buy shampoo or razors, but not where you buy washing machines, or running shoes, or pianos, if retailers are able to offer a comparable level of convenience to Wal-Mart.

In other words, if I can pick up my bike helmet the next day at Wal-Mart or at Art’s Cyclery, I would likely pay a reasonable premium to go to Art’s. But if Art’s can’t tell me if the helmet is in-store, or if I have to wait seven days for Art’s to deliver my order to my house, then Wal-Mart may win my business, even though I like buying at Art’s better.

This is why retail shops must focus on launching the same features that Amazon and Wal-Mart are launching—in-store pickup, ship-from-store, and in-store returns for online orders—so they can continue to use their competitive advantages, e.g., better in-store experiences, to win customers away from these elephants.

“When elephants fight … the grass gets hurt,” Tom Gara wrote in his blog post, “and a fight between the two elephants of American retail will be a sight to behold.”

So the question for you is, will you be grass, or will you be the mouse that stands up and scares the elephant off of its turf?